From CBS News
Today Fannie Mae and Freddie Mac–two government-sponsored enterprises originally designed to increase the availability of loans and thereby raise levels of home ownership–dominate the US mortgage lending market. Fannie Mae, which was established in 1938 as part of Franklin Delano Roosevelt’s New Deal, provides local banks with federal money to finance home mortgages. Freddie Mac, created in 1970, underwrites mortgages that fall below a certain size threshold with the intention of helping homeowners get access the housing market. These mortgages are cheaper since they implicitly–and after 2008 explicitly–benefited from a government guarantee.
Read the full post at CBS News Opinion
Research from: Credit Supply and House Prices: Evidence from Mortgage Market Segmentation By Manuel Adelino, Dartmouth College, Antoinette Schoar, MIT and NBER, Felipe Severino MIT (Forthcoming)
Antoinette Schoar is the Michael Koerner ’49 Professor of Entrepreneurial Finance at MIT Sloan School of Management.
What do you think?